UPDATE 1-Reshaping IKEA Group makes $3.6 bln profit

Reuters Staff

3 Min Read

(Adds detail, CEO comment, background)

STOCKHOLM, Nov 28 (Reuters) - IKEA Group, the owner of most IKEA furniture stores, reported a drop in annual operating profit due to the sale of several businesses as well as investments in areas such as the internet and logistics.

The world’s biggest furniture group said on Tuesday it made an operating profit of 3.0 billion euros ($3.6 billion in the year to the end of August.

The year before, when IKEA Group sold its product development, production and supply chain subsidiaries to brand owner Inter IKEA, profit was 4.5 billion euros.

“The decrease in operating result was mainly driven by the loss of profit from the companies that were sold in the transaction, as well as the increased costs in IKEA Retail to support multi-channel growth and expansion,” IKEA Group said.

The Swedish company is known for its large out-of-town warehouse stores and self-assembly budget furniture.

But in the face of changing shopper expectations, and with growing competition from online players such as Amazon, IKEA is investing in e-commerce and services, and trying new concepts such as pick up-and-order points and city-centre showrooms to become more accessible.

“During the full year, the IKEA Group invested 3.1 billion euros in stores, distribution and customer fulfilment network, shopping centres, renewable energy and forestry,” it said, without giving a comparable figure for the year before.

Jesper Brodin, chief executive since September, told Reuters that as part of a push to adapt to rapid urbanisation as well as digitalisation, city-centre full-range showrooms would hopefully open in Greenwich, Britain, and Copenhagen, Denmark, in 2019 and 2020.

IKEA Group in October reported full-year retail sales growth of 4 percent to 34.1 billion euros, with online sales up 28 pct to account for 5 pct of the total.

It said on Tuesday that sales grew 2 percent in Germany, its biggest market, to 4.9 billion euros.

IKEA stores worldwide are owned by 11 franchisees, of which IKEA Group is the biggest with 355 stores at the end of August. Franchisees pay 3 percent of their annual sales to Inter IKEA.

Inter IKEA has said total annual retail sales at all 403 IKEA stores combined were 38.3 billion euros.